Exchange rate falls across the forex markets as CBN devalues the naira

Nigeria’s exchange rate at the NAFEX window depreciated to N386 during last intraday trading on Friday, August 7, 2020. In another development, the exchange rate at the parallel market dropped marginally on Friday as it closed at N475/$1 after exchanging as high as N486/$1.

Parallel Market: At the black market where forex is traded unofficially, the Naira depreciated against the dollar to close at N475/$1 on Friday, according to information from Abokifx, a prominent FX tracking website. This represents a N1 drop when compared to the N474 to a dollar that it exchanged on Thursday, August 6.

NAFEX: The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Friday, closing at N386/$1.

• This represents a 50 kobo drop when compared to the N385.50 rate close that was reported on the last trading day, Thursday, August 6.
• The opening indicative rate was N385.55 to a dollar on Friday. This represents a N1.33 gain when compared to the N386.88 to a dollar that was recorded on Thursday.
• The Naira fell to as high as N390 during intraday trading before strengthening to the closed rate of N386. It also sold for as low as N359/$1 during intraday trading.

Forex is sold at several prices and at different times during the day.

Forex Turnover: Meanwhile, forex turnover at the Investor and Exporters (I&E) window recorded a massive increase on Thursday, August 6, 2020, as it rose by 916.77% day on day.

Exchange rate unification remains on the cards and yet to be implemented weeks after the central bank governor confirmed it will be executed.

The exchange rate has faced significant pressure in both the NAFEX window and the black market. The pressure stemmed from declining external reserves and low oil price.

In a move seen as a step towards the unification of the exchange rate, the Central Bank of Nigeria (CBN), devalued the official exchange rate to N380/$1 from N360/$1. The adjustment which was formally done on CBN’s website suggests the CBN may have moved to unify the exchange rate in line with the promise earlier made by the apex bank’s Governor, Godwin Emefiele.

This is the second devaluation of the official rate since the crash of oil prices and the outbreak of coronavirus pandemic. The first one occurred in March when the official rate was adjusted from N307/$1 to N361/$1.